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Questions from industry organizations

CEMCP
ROSATOM

The list of questions regarding pricing, cost estimates, audit of cost estimates for the construction of nuclear facilities within the framework of the ROSATOM Division for Construction Pricing and Cost Estimates Validation's awareness programs and awareness-raising efforts for the nuclear industry organizations involved in the implementation of the investment and construction projects of the State Atomic Energy Corporation Rosatom, as well as questions about changes in the federal laws and acts in framework of the implementation of the Ministry of Construction of the Russian Federation measures to improve pricing pattern in the construction in Russia.

  • Audit of cost estimates for the construction of nuclear facilities

    Question:

    When using cost estimation base and index method, the cost of equipment and materials should be determined based on 2001 basis prices. If only there are no estimate prices for materials, products and frameworks in the basic estimate price book, it is allowed to determine costs based on price lists at the current price level with the cost harmonized with the 2001 basis prices (as of 01.01.2000) using the reverse calculation method in accordance with the estimated cost adjustment indices for the corresponding period.

    When auditing the construction cost estimates, the revaluation of equipment and material costs fr om the current price level to the basis one is made by using the reverse calculation method with the indices specified at the end of the summary cost estimates. What document regulates that recalculation of the cost from the current price level to the basis one is carried out by the index specified at the end of the summary cost estimates and not as of the date of the price lists drafting?

    Answer:

    According to paragraph N30 of the Regulation on composition of design documentation sections and requirements to their content, approved by Regulation of the Government of the Russian Federation dated 16.02.2008 N 87, cost estimates documentation is prepared via use of basis prices and prices prevailing at the time of its drawing up. The cost of material and technical resources and equipment, that is not included in the book of state estimate standards, should be determined by the reverse calculation method based on information (price lists) about the current cost of used equipment, materials, products and frameworks. Thus, price lists should be formed not earlier than 3 months before the date of compilation of the summary cost estimates (item 3.4.2 of Appendix N 1 to the Uniform Industry Methodological Instructive Regulations). Therefore, the estimated cost adjustment index is used for converting the material and technical resources and equipment from the current price level (formed at the time of drawing up the cost estimates documentation) to the basis prices and back should be the same and correspond to the period of drawing up the summary cost estimates.

  • Audit of cost estimates for the construction of nuclear facilities abroad

    Question:

    According to paragraph 3.3.1.4.1 of the Unified industry procedure for design documentation analysis and assessment (Order N1/485-P of ROSATOM dated 31.05.2017 as amended on 20.12.2019) as a part of the section «Capital construction project cost estimates» in accordance with the Letter of the State Committee of the Russian Federation for Issues Relating to Architecture and Construction and the Ministry of Foreign Economic Relations of the Russian Federation N12-134 dated 31.05.1993 «On the cost estimates documentation procedure for construction projects abroad», summary cost estimates of a construction project. The summary is drawn up in inside (basis) prices for the basic region(Moscow Oblast) to use it for mixed price cost estimates (including without limitation determination of the amount of material and human resources).

    Please could you give detail about the scope of summary cost estimates which meets the requirements of paragraph 2 of the Procedure approved by the Letter of 1993 (excluding costs from chapters 1, 9, 10, 11, and designer's supervision costs , etc.), or in accordance with the requirements of the Procedure for Determination of the Construction Products Cost (MDC 81-35.2004).

    Answer:

    According to paragraph 3.6 of Appendix N1 to the Uniform Industry Methodological Instructive Regulations on design assignment development of capital construction projects (hereinafter – UIMIR), approved by order N1/1219-P of ROSATOM dated 07.11.2019, summary cost estimates (SCE) is provided in line with the MDS 81.35-2004. The summary must be made in basis prices of the Russian Federation. A material and human resources sampling must be drawn in the summary cost estimates supplement in inside (basis) prices of the Russian Federation, (paragraph 2.13 of The cost estimate documentation Procedure for construction projects abroad with participation of Russian organizations, introduced by the letter of the Russian Federation State Committee for Construction, Architectural and Housing Policy N12-134 dated 31.05.1993 (hereinafter – the Procedure).

    According to the Procedure, based on the data from SCE in inside (basis) prices (including the amount of materials and labor resources), a summary estimate is made in mixed prices.

    Question:

    According to paragraph 3.3.2.3.6 of the Unified industry procedure for design documentation analysis and assessment (Order N1/485-P of ROSATOM dated 31.05.2017 as amended on 20.12.2019) the subject matter of the analysis and evaluation of the estimated part of the design documentation for the NPP construction projects abroad is a review of compatibility or non-compatibility of cost estimates documentation with the costing standards, that are included in the Federal Register of costing standards, and with the requirements for estimation procedures for construction projects abroad.

    Please could you clarify what documents on a first-priority basis are required when developing the cost estimates documentation (as part of the summary cost estimates, compiled via the base and index method) in the case of different approaches: the Procedure approved by the Letter of 1993 or the fundamental principles mentioned by the MDC 81-35.2004, when determining the same costs (for example, the amount of transport costs).

    Answer:

    The way for determining the construction cost of facilities situated outside the Russian Federation is set in the Procedure included in the Federal Register of costing standards (hereinafter – FRCS).

    At the same time, the Procedure was brought into force in 1993 and contains references to ineffective regulatory documents. When using the Procedure, the references to ineffective documents must be replaced with the standards included in the FRSN.

    For example: Transport costs for cargoes across the Russian Federation must be determined in accordance with MDS 81-35.2004; overhead costs and estimated profit for Russian organizations are based on MDS 81-33.2001 and MDS 81-25.2001.

    Question:

    The replaceability of Summary cost estimates in mixed prices set out in the FRCN document «Procedure for cost estimates documentation of construction projects abroad» (letter of State Committee for Construction of Russia N 12-134 dated 31.05.1993) for the TCM NC Class 3 estimate: Is it possible to eliminate the requirement for drawing up Summary estimates in mixed prices of a construction project abroad, provided by the Order of ROSATOM N 1/485-P dated 31.05.17 «On approval of the procedure for the Unified industry procedure for pre-design and design documentation, engineering surveys analysis and assessment in ROSATOM» (as amended by the Order N 1/1511-P dated 26.12.2018) while maintaining the requirement for TCM NC Class 3 estimate of a construction project abroad, as set in the same order, since essentially in composition these documents are similar?

    Answer:

    The subject matter of analysis and assessment of the cost estimate part of the design documentation for NPP construction projects abroad is a review for compliance or non-compliance of:

    • cost estimates documentation in basis prices as on 01.01.2000, with costing standards included in the Federal Register of costing standards
    • summary estimates in mixed prices with the requirements of the Procedure for cost estimates documentation of construction projects abroad, introduced by the letter of State Committee for Construction of Russia N 12-134 dated 31.05.1993 (hereinafter – the Procedure)

    Class 3 estimate needs a review for compliance with the requirements of the Methodological instructive regulations on the construction cost estimates for new nuclear power plants in the Russian Federation and abroad (N 1-8/19-PD dated 28.06.2018, hereinafter – the Methodical regulations).

    In accordance with the Methodological regulations, Class 3 estimate is carried out based upon the design (and estimate) documentation, that is approved according to the expert review results. In addition, Class 3 estimate is prepared in then-year prices, taking into account project deadline and escalation indices, and should also contain a project risk assessment and its impact on deadlines and budget.

    As these two approaches to the documentation drafting differ, they are non-exchangeable.

  • Audit of commissioning cost

    Question:

    Lack of industry-specific costing standards database in the Federal Register of costing standards

    Answer:

    With the view of arranging ROSATOM estimated standards for nuclear power facilities, a working group has been established to deal with issues concerning development, endorsement, and approval of state elemental estimate standards and federal unit prices for nuclear power facilities, and carrying out technical rate setting (order No. 1-12/21-R dated 15.01.2019). The working group operates under the costing standards approval procedure (order of Minstroy of Russia No. 2 / PR dated 13.01.2020. ROSATOM enterprises put forward proposals to a working group leader concerning updating the costing, providing documents, that are listed in the order of Minstroy of Russia No. 2/pr dated 13.01.2020.

    Currently, ROSATOM develops 239 state elemental cost estimate standards (federal unit prices) projects are being developed, including 40 standards that are approved by the FAI Glavgosexpertiza of Russia and reviewed by the Expert advisory board under the Ministry of Construction of Russia to be enlisted in the Federal Register of costing standards.

  • The procedure for cost estimates of MTEF sections

    Question:

    Define the procedure for cost estimates of MTEF sections:

    • Section III «Costs for customer operational personnel activities in commissioning and startup»
    • Section IV «Sundry expenses and works»

    And the procedure for NPP operational staff training services.

    Answer:

    Section III Summary cost estimates includes costs for operational personnel activities in commissioning and startup; commissioning and startup personnel number required is determined based on design specifications (according to the required personnel number and duration of work for commissioning). At the same time, cost estimates takes into account only the labour costs of the operational personnel with clearance to work unsupervised. Costs for commissioning and startup personnel with clearance to work unsupervised during the «idle phase» are charged to capital investments, and during operational phase» are met from the operating company's core activity.

    The list of costs that can be included in Section IV Summary cost estimates is recoded in the Uniform Industry Methodological Instructive Regulations, that is approved by ROSATOM Order N 1/1292-P dated 22.12.2016. It should be noted that, the need to include certain types of work and costs must be substantiated. The procedure for (calculation methodology) sundry works and costs is established by the Industry Regulations for commissioning costs when putting nuclear power facilities into operation (ROSATOM Order N205 dated 16.06.2008).

    Personnel training costs are not included in the commissioning and startup costs, and are calculated from summary cost estimates (in accordance with item 4.88 MDC 81-35.2004) and according to

    • the number and qualifications structure of the personnel, whose training is planned in training centers, technical schools, onsite training facilities related to similar industries, etc.
    • training time
    • costs for theoretical and industrial personnel training
    • salaries (traineeship) and bonus payments of trained workers
    • costs for commute to place of training and back
    • other expenses related to the training of the personnel
  • Construction cost estimates for nuclear facilities

    Question:

    According to paragraph 4.55 of MDC 81-35.2004 «Equipment costs include costs for spare parts, that are used during warranty operating life. It is recommended that an equipment technical writer should specify the list and quantity of spare parts. Most commonly, spare parts are included into the equipment delivery set, and their cost – into the equipment purchase price. In cases when spare parts are not included in the equipment delivery set, the cost of spare parts is considered by the specification for spare parts at contractual prices». According to paragraph 4.56 MDC 81-35.2004 «If there are no specifications for spare parts, the parts cost can be rated on a percentage basis of the selling prices for the equipment according to standards of corresponding federal executive authorities. If there are no specific specifications for spare parts, the parts cost can be assessed at 2 percent of the equipment selling prices».

    Please could you clarify whether the cost for spare parts is included in the estimated construction cost or in operating costs.

    Answer:

    According to GOST 27.507-2015 «Interstate standard. Industrial product dependability. Spare parts, tools and accessories. Evaluation and calculation of reserves» SPTA is a package of spare parts, tools and accessories designed to ensure the operation (repair and maintenance) of the product.

    According to paragraph 4.53 of the MDC 81.35-2004, construction cost estimates take into costs for equipment, necessary for the initial equipment of newly constructed, and expanding public and administrative buildings.

    Equipment costs include costs for spare parts, that are used during warranty operating life. An equipment technical writer should specify the list and quantity of spare parts (paragraph 4.55 MDC 81-35. 2004).

    Thus, the cost estimated documentation includes the cost for spare parts that are used during warranty operating life in accordance with the list and quantity of SPTA specified by the Manufacturer's Data Report for the equipment.

    Question:

    According to paragraph 4.44 of MDC 81-35.2004, cost estimates and construction cost estimates of enterprises, buildings and structures take into account the cost for equipment as defined in the project. This equipment is designed to ensure operation of the an enterprise, a building and a structure and divided according to its purpose in:

    • engineering
    • power engineering
    • carrying and lifting
    • freight vehicles, including the rolling stock for transportation of cargo by rail, accepted on the developer's account
    • other types of vehicles for transportation of bulk and general cargo

    When designing a nuclear power plant, the design solutions provide for special vehicles for transportation of radioactive waste within the nuclear power plant site. Paragraph 5 of Annex 5 of MDC 81-35.2004 contains a list of equipment and vehicles, which are mobile transport units not related to the production technology. These equipment and vehicles cannot be reflected in construction cost estimates. Special vehicles for radioactive waste transportation within the nuclear power plant site are not included in the list and are directly related to nuclear power production process. Is it possible to include the costs for these special vehicles in the NPP construction cost?

    Answer:

    According to paragraph 4.53 of MDC 81.35-2004, the list of equipment of public and administrative buildings is formed on the basis of design documentation. The construction cost estimates take into account only the amounts of equipment required for the initial equipment of newly constructed and expanded buildings.

    As radioactive waste is a product of the operation of the nuclear power plant, it is not possible to include the cost of vehicles for transporting the waste in the construction cost of the facility. Purchase of these special vehicles should be ensured by means of operation.

  • Construction cost estimates for nuclear facilities abroad

    Question:

    In what form construction cost estimates for nuclear facilities abroad should be submitted: in the form of the summary cost estimates in mixed prices or in the form of the summary cost estimates in current prices? This issue is linked to the way different local normative acts set requirements for the final form of the document and the process of its formation. Moreover, please could you clarify whether the requirements for the summary cost estimates in basic prices are mandatory for the industry or state expert review of cost estimate documentation (in the case of federal funds) concerning foreign construction projects.

    Answer:

    According to paragraph 2.1 article 8.3 of the Urban Development Code of the Russian Federation, cost estimates for capital construction projects outside the Russian Federation is calculated according to procedures determined by the Government of the Russian Federation. Prior to the approval of this procedure, it is necessary to draw up the estimated documentation in accordance with the Procedure for cost estimates documentation of construction projects abroad, put into effect by the letter of the Russian Federation State Committee for Construction No. 12-134 dated 31.05.1993 (hereinafter the Procedure), included in the Federal Register of costing standards. The Procedure, which has been in place since 1993, makes it impossible to reliably determine the estimated construction cost.

    At the same time, the Russian Ministry of Construction has developed a draft Methodology for construction cost estimates for nuclear facilities outside the Russian Federation (hereinafter – the Methodology). Besides, the Methodology may be approved only after amendments made to the Urban Development Code of the Russian Federation that specify the powers of the Ministry of Construction of Russia to approve the Methodology.

    In order to establish reliable determination of the construction cost estimates for nuclear facilities outside the Russian Federation, prior to approval of the Methodology by the Ministry of Construction of Russia, the Temporary Uniform Industry Methodological Instructive Regulations (TUIMIR) for construction cost estimates for nuclear facilities have been developed. Currently, the TUIMIR has been placed in the Unified Industry Electronic Document Management System for approval. Once approved by ROSATOM, TUIMIR can be used for drafting cost estimated documentation. However, TUIMIR is mandatory when determining the cost of construction of newly designed facilities; for facilities, whose project design was started before TUIMIR introduction, the decision on its application is made by the customer.

  • Procedure for calculating the level of wages

    Question:

    There is no defined procedure for calculating a salary level, standards for overhead costs and estimated profit of MTEF sections: Section I «Commissioning and Startup activities».

    Answer:

    Labour payment of commissioning personnel should be determined by the ROSATOM order concerning average monthly salary of the first category employee, using pay rate multiplier provided by the Methodology for determining personnel costing in construction. It is approved by the order of the Ministry of Construction of the Russian Federation No. 515/pr dated 04.09.2019.

    Overhead costs and estimated profit for commissioning should be determined using the standards included in the Federal Register of costing standards (MDC 81-33.2004, MDC 81-25.2001), assessed at 65% and 40%, respectively, of the payroll of commissioning personnel.

  • Russian workers salaries in the construction of facilities outside the Russian Federation

    Question:

    Please explain the procedure for determining, coordinating and approving the estimated salaries of Russian workers in the construction of facilities outside Russia.

    Answer:

    Labour payment of commissioning personnel should be determined by the ROSATOM order concerning average monthly salary of the first category employee, using pay rate multiplier provided by the Methodology for determining personnel costing in construction. The Methodology is approved by the order of the Ministry of Construction of the Russian Federation No. 515/pr dated 04.09.2019. When calculating labour payment additionally considered costs under Russian labour law, concerning conditions of stay in the country of construction project should also be allowed for. In particular, the costs for employee relocation estimated on the basis of a local regulatory act of the industry contracting company, which regulates the provision of specific compensation and benefits, as well as their amounts. At the same time, the list of benefits and the lim it of social expenses must be agreed with the Department of Personnel Policy of Rosatom State Corporation.

  • Calculation of costs for construction and erection works (SMR) based on indices published in quarterly letters of the Ministry of Construction of the Russian Federation

    Question:

    Is it possible to single out from the estimated cost adjustment index for construction works of the capital construction project «Other projects», the cost index for «Labour payment» and set the index as economically feasible to correspond to the average level of salary of construction employees in the region, when calculating indices for estimating costs for construction and erection works at nuclear facilities, published in the quarterly letters of the Ministry of Construction of the Russian Federation?

    Answer:

    It is not possible to single out from the estimated cost adjustment index for construction works of the capital construction project «Other projects», the cost index for «Labour payment» and set the index as economically feasible.

    In turn, as part of measures to implement the Guidelines for cost monitoring of construction resources (approved by Regulation of the Government of the Russian Federation No.1452 dated 23.12.2016, as amended on 15.05.2019 N 604) ROSATOM has been carrying out work on developing data for the Glavgosexpertiza of Russia to calculate estimated cost adjustment indices for nuclear facilities construction (hereinafter — Indices) as part of the indices published quarterly by the Ministry of Construction of the Russian Federation, in order to determine the estimated cost of nuclear facilities construction. In an effort to develop estimated prices for labour costs within the calculation of Indices, in February 2020 there was developed the calculation of the average monthly salary of first category employees of construction and erection labourers, engaged at the construction of the nuclear facilities during 2019 (hereinafter – the Calculation), in accordance with the calculation methodology for estimated cost adjustment indices of construction (approved by the order of the Ministry of Construction of the Russian Federation N 326/p dated 05.06.2019, hereinafter – Methodology).

    The Calculation is agreed with the Glavgosexpertiza of Russia, followed by the ROSATOM order N 1/381-P dated 14.04.2020, which sets the average monthly salary of employees engaged in the construction of nuclear facilities during 2019 in 17 states of the Russian Federation, in which nuclear facilities are located (hereinafter – the Order). Paragraph 5 of the Order recommends that the labour payment parameters, specified in paragraph 3 of the Order, should be used for calculations for completed work of the Rosenergoatom JSC construction projects.

    Currently, to calculate the Glavgosexpertiza Indices, the Department of industry pricing in construction and costing reviews is working on the preparation of supporting documents formed in accordance with the Methodology.

  • The use of materials indices

    Question:

    Provision of recommendations and explanations on how to recalculate the cost from the basic price level for the direct cost element «Materials» to the current price level for pilot and demonstration power facility construction projects when switching to payment for work performed at the regional level of remuneration and the estimated cost adjustment indices developed by the regional center for pricing in construction and officially published on quarterly basis.

    Answer:

    Indexation of the cost of materials that were included in the estimated cost based on current prices using the quarterly conversion index must be performed in accordance with paragraphs 4.2.16, 4.2.17 of the ROSATOM order No. 1/1478-P dated 19.12.2018 (as amended on 12.03.2020) «On approval of Unified industry Methodology for the design of specifications, estimates and forms of primary accounting documentation used for acceptance and settlement for construction and erection works» (hereinafter – Methodology).

    Processing and issuing the Acceptance Certificate (KS-2 form) concerning recalculation of the cost of material resources, the estimated cost of which is determined by the reverse calculation method, is performed in accordance with paragraph 5.2.6 of the Methodology.

    Recalculated cost of materials from the basic price level to the current level of prices in the KS-2 form Certificates are done with the use of the estimated cost adjustment index, on the basis of which the basic cost of the local estimates with respect to given period matching to the date of KS-2 form Certificate was determined. A technical customer makes a decision on the time period of the estimated cost adjustment index, taking into account the provisions of a contractor's agreement.

    If there is no estimated cost adjustment index of material resources in the official publication, it is recommended to conclude an agreement with the regional center for pricing in construction on the release of indices for the necessary list of material resources.

  • The use of equipment indices

    Question:

    The use of the equipment recalculated cost index in the cost estimate documentation when using the reverse calculation method to determine the basic cost:

    When determining the price of equipment in the estimated calculations in the basic prices of year 2000 from the current prices of similar agreements with the date of agreement further than 1 year from the period of drawing up the cost estimate documentation, it is necessary to bring the PDDI to the price level on the date of drawing up the cost estimates documentation. Which method is more accurate and will be approved when undertaking an industry review: bringing PDDI to the price level on the date of drawing up the cost estimates documentation by applying the Rosstat indices for the corresponding time period or using index for revised period of equipment supply similar agreement to determine the basic equipment cost index?

    Answer:

    According to paragraph 30 of the Regulations on composition of design documentation sections and requirements to their content, approved by Regulation of the Government of the Russian Federation N 87 dated 16.02.2008, cost estimate documentation is made up with the use of the approved estimate standards, described in the Federal Register of costing standards in the basic level of prices and the prices prevailing at the time of its compilation.

    The cost of material and technical resources and equipment that is not included in the book of state estimate standards, should be determined by using the reverse calculation method and by transferring from the current level of prices into the basic one with the use of estimated cost adjustment indices, officially published in letters of the Ministry of Construction of the Russian Federation and recoded in the Federal Register of costing standards. Other indices (including Rosstat indices) that are not included in the Federal Register of costing standards can not be used when making up cost estimate documentation.

    Considering the fact that to calculate the cost of material and technical resources and equipment using the reverse calculation method should be determined based on information about the current cost of the equipment, materials, products and structures used. Price lists, technical and business proposals should be developed no earlier than 3 months before the date of drawing up the summary cost estimates (paragraph 3.4.2 of Annex 1 to the UIMIR). Therefore, the estimated cost adjustment index used for recalculation of the cost of material and technical resources and equipment from the current price level (formed at the time of drawing up the cost estimate documentation) to the basic price level and back should be the same and coincide with the period of drawing up the summary cost estimates.

  • Other

    Question:

    Determination of the source of volumetric parameters when calculating the costs for undertaking the industry review.

    Answer:

    The source of volumetric parameters is determined based on design data, or based on data from similar projects.